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Glaxo’s SR One Injects Pharma Bucks into $22M Round for Constellation Pharma

Xconomy Boston — 

Scientists have been buzzing for years now about new drugs that can turn DNA on or off in ways that affect many diseases. Now more big pharmaceutical dollars are flowing to support this idea at a Cambridge, MA-based biotech that specializes in making drugs based this field of genetics research.

SR One, the venture capital arm of London-based drug giant GlaxoSmithKline, has led a $22 million Series B round of financing for Cambridge, MA-based Constellation Pharmaceuticals. (Christoph Westphal, a well-known biotech entrepreneur based in Boston, became the president and head of SR One in April.) Constellation also drew part of its second-round financing from its previous venture backers: Altitude Life Sciences, The Column Group, Third Rock Ventures, and Venrock Associates.

Constellation, which has now raised $54 million since it was founded in 2008, is searching for new ways to treat cancer with drugs that target so-called epigenetic enzymes. The enzymes can control how spools of DNA strands in our cells express or mute certain genes. The drugs could be useful, say, in blocking the enzymes that prevent tumor-suppressing genes from making natural proteins that kill cancer cells. (More on epigenetics here.) Mark Goldsmith, the company’s CEO, says drugs that target epigenetic enzymes could also be used to treat inflammatory, immune, and diseases other than cancer.

Glaxo (NYSE:[GSK), one of the ten largest drug firms in the world, has made Constellation its latest bet in the field of epigenetics. In October, the drug giant spent $8 million upfront to form a collaboration with the Dublin, CA-based biotech firm SuperGen to develop cancer drugs that home in on epigenetic targets. Also, Glaxo operates an epigenetic research group in the U.K. called EpiNova.

With SR One’s investment in Constellation, Westphal is making his leadership at Glaxo’s venture arm felt in his hometown. Though SR One is officially headquartered in Conshohocken, PA, Westphal has said he would remain based in the Boston area, where he’s co-founded and served as CEO of such high-flying biotech firms as Alnylam Pharmaceuticals (NASDAQ:[[ALNY]]), Momenta Pharmaceuticals (NASDAQ:MNTA), and, perhaps most famously, Sirtris Pharmaceuticals. Glaxo bought Sirtris, a developer of drugs that target anti-aging genes, for $720 million in May 2008. And Westphal had remained CEO of Sirtris until April, when he resigned to take the helm at SR One.

On top of his SR One duties, Westphal is quietly putting together the pieces for a new venture firm in Boston called Longwood Founders Fund with fellow Sirtris alums Rich Aldrich and Michelle Dipp.

“[Westphal] was certainly an important catalyst in bringing this [investment in Constellation] to fruition,” Goldsmith said. “We worked with multiple members of the SR One team.”

Brian Gallagher, an SR One partner and a former head of corporate development at Sirtris, has taken an observer seat on Constellation’s board of directors. Gallagher is also based in the Boston area.

In addition to Westphal, Constellation lists other big names in biotech among its founders and investors. Mark Levin, the startup’s founding CEO, was previously chief executive of the Cambridge-based cancer drug developer Millennium Pharmaceuticals (which was acquired by the Japanese drug giant Takeda for $8.8 billion in April 2008.) The former Millennium boss co-founded Third Rock Ventures, a Boston venture firm focused on life sciences investments, which was a lead investor in Constellation’s $32 million Series A round.

Constellation hasn’t yet identified which specific cancers it aims to treat with its drugs, but Goldsmith gave me an overview of the firm’s drug-development timeline last September.

Goldsmith says that he aims to form a corporate partnership sometime in 2010 that would provide additional financial support to develop his firm’s drugs, which have not yet been tested in humans. Large drug companies have been a growing source of capital for biotechs like Constellation, which would agree to give up rights to certain products in its pipeline in exchanged for cash. SR One’s investment in Constellation is purely a financial one. That means that the parent company, Glaxo, doesn’t get any rights to develop the startup’s technology, only the possibility of generating an investment return like any other VC firm.

Epizyme, Constellation’s cross-town rival in the epigenetics field, is also hunting for its first corporate partnership. Earlier this year Epizyme recruited Jason Rhodes, a former executive at Alnylam, to help the firm forge new alliances with big drug companies. Like Constellation, Epizyme has already drawn investments from drug companies’ venture arms. Epizyme’s $40 million Series B financing included investments from Amgen Ventures and Astellas Venture Management, which make bets on biotech firms on behalf of the Thousand Oaks, CA-based biotech giant Amgen (NASDAQ:AMGN) and Japan-based Astellas Pharma.

We expect to hear about a lot of developments in epigenetics research from the American Society of Clinical Oncology (ASSCO) annual meeting in Chicago from June 4 through June 8. I’m scheduled to speak to a biotech CEO about one such development today, so you can expect to hear more about this burgeoning field soon on Xconomy.